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US-China trade truce leaves fundamental issues unresolved · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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Speaker 1: and Mike Armstrong.
1:09
Speaker 2: Chuck, Mike and Tucker with you kicking off a major
1:12
Speaker 2: week of earnings, probably the week of earnings for Q
1:17
Speaker 2: three as you look at what is set up out
1:20
Speaker 2: there and today nothing particularly you know, overly exciting. Yeah, sure,
1:26
Speaker 2: if you're into Currig, doctor Pepper, hopefully not. At the
1:28
Speaker 2: same time, they reported earnings before the bell today they
1:31
Speaker 2: were fine, in line with expectations. But ultimately, you don't
1:35
Speaker 2: have a single company with a market cap of one
1:37
Speaker 2: hundred billion dollars or more reporting earnings today, and so yeah, well,
1:43
Speaker 2: you know, you might personally be wondering, Hey, how is
1:46
Speaker 2: you know, Avia's budget going to do today? It's a
1:48
Speaker 2: five billion dollar company and it's not going to move
1:51
Speaker 2: the markets the rest of this week, though, Dolly g Willkers,
1:56
Speaker 2: We've got all kinds of action tomorrow. We've got Visa,
2:00
Speaker 2: United Health, Booking Holdings, Royal Caribbean, Sherwin Williams, Corning, Ups, PayPal.
2:07
Speaker 2: That's just a handful of the ones that are reporting.
2:09
Speaker 3: That gives you a pretty good insight into that phenomenon
2:12
Speaker 3: we've been talking about with the top end consumer right
2:15
Speaker 3: between Booking Holdings, Visa, like these companies really have something
2:19
Speaker 3: to tell you about that state of the consumer.
2:21
Speaker 2: Totally ups what's going on with you know, shipping and
2:24
Speaker 2: things like that. PayPal, tell me what you're seeing. You've
2:26
Speaker 2: run a bunch of credit cards. Now you've got a bank, Like,
2:28
Speaker 2: what's happening on that side of things. Wednesday we get
2:32
Speaker 2: really heavy into the tech earnings, but also just again
2:35
Speaker 2: a monster day overall, Microsoft, Meta and Alphabet all reporting.
2:40
Speaker 2: Then we've got Caterpillar, We've got Verizon, We've got Boeing,
2:44
Speaker 2: We've got CVS, we've got Starbucks, we got Chipotle. I mean,
2:49
Speaker 2: if you can't learn what's happening with you know, households
2:52
Speaker 2: and businesses after this, you're kind of missing the boat. Yeah,
2:56
Speaker 2: you're not going to if that's not enough for you, though,
2:58
Speaker 2: you say, okay, what's going on on Thursday? Do you
3:00
Speaker 2: have anything interesting for me? Then yes, in fact we do.
3:03
Speaker 2: We've got Apple, Amazon, MasterCard, Comcast, We've got let's see,
3:11
Speaker 2: those are kind of the big ones. I mean, I
3:14
Speaker 2: just I'm not sure the rest of these really rise
3:16
Speaker 2: to the level of being sure overly interesting. But that's enough.
3:20
Speaker 2: I mean, Apple and Amazon, I mean okay, fine, like
3:22
Speaker 2: just alone is enough for me.
3:24
Speaker 3: To be clear, for markets in general, between Alphabet, Meta, Apple, Amazon,
3:29
Speaker 3: and Microsoft, you're talking about fifteen trillion with a T
3:33
Speaker 3: dollars worth in market capitalization that are reporting this week.
3:36
Speaker 2: Yeah, over two days, So that's that's five hundred right now.
3:40
Speaker 2: That's the whole ball game.
3:41
Speaker 3: Yes, and video will come out a few weeks later,
3:44
Speaker 3: but this is the week and they will have a
3:50
Speaker 3: massive influence on the direction of markets overall.
3:52
Speaker 2: Now you might be sitting there saying, hum chuck, that's okay,
3:55
Speaker 2: I'm not really interested in individual stock girnings. What do
3:58
Speaker 2: we have for data? Not my government's closed. Government's closed.
4:02
Speaker 2: Data is closed. We were supposed to get durable goods
4:05
Speaker 2: orders this morning. We did not get durable goods orders
4:07
Speaker 2: this morning. Tomorrow we're supposed to get case Shiller home
4:11
Speaker 2: Price Index and FHFA Home Price Index. We will get
4:14
Speaker 2: case Shiller, we will not get FHFA. On Wednesdays, F's
4:20
Speaker 2: stands for federal one would imagine, you know, it's the
4:25
Speaker 2: fuffa is how it's referred to in the biz. That
4:27
Speaker 2: makes sense. Wednesday, we do have a FED meeting. I
4:29
Speaker 2: think it's going to be one of the most boring
4:31
Speaker 2: FED meetings we've had, just because the FED is almost
4:35
Speaker 2: assuredly going to cut by a quarter percent, and I'm
4:38
Speaker 2: not sure they're going to have much to tell us
4:40
Speaker 2: because they haven't been getting the government data either.
4:44
Speaker 3: Yeah, the only questions that are going to exist are
4:47
Speaker 3: how do you assess the economy without government data?
4:49
Speaker 2: What do you ask J Powell this week?
4:50
Speaker 1: Right?
4:52
Speaker 2: You know, like you're not gonna askhim about Argentina.
4:54
Speaker 3: Maybe we get a ton of questions about how the
4:57
Speaker 3: building improvement project.
4:59
Speaker 2: Is going O day? What are you going as for Halloween? Yeah? Yeah,
5:03
Speaker 2: that might be the most interesting. You know, like this
5:05
Speaker 2: is kind of going to be it, So I think
5:07
Speaker 2: you're kind of baked in there. On Thursday, we're supposed
5:10
Speaker 2: to get first reading of Q three GDP not getting
5:14
Speaker 2: it right. We're supposed to get initial and continuing jobless
5:17
Speaker 2: claims not getting it. We were supposed to get PCE
5:21
Speaker 2: prices not getting it. Okay, Like what does one do
5:26
Speaker 2: with this Friday? We are supposed to get personal income
5:30
Speaker 2: and spending not getting it, Employment Cost Index not getting it.
5:34
Speaker 2: So there's really not much. The only major driving force
5:39
Speaker 2: for data this week is going to be the FED,
5:42
Speaker 2: and that's not really data that's just Ja Powell showing
5:44
Speaker 2: up and saying I pressed the down button once. And
5:47
Speaker 2: beyond that, I'm not sure that there's much on that side,
5:52
Speaker 2: but there's enough in earnings that you don't really need
5:55
Speaker 2: too much in the way government data to get excited
5:57
Speaker 2: this week. It's just at a certain point what you'd
6:00
Speaker 2: like to, you know, see that data. Maybe.
6:04
Speaker 3: So we're twenty seven days into the shutdown, you are
6:06
Speaker 3: starting to see more in the way of flight delays.
6:09
Speaker 3: I think you had eight thousand flight delays or cancelations yesterday,
6:12
Speaker 3: which is about twenty percent of US flights yep, in
6:15
Speaker 3: a pretty big increase over the prior week. So you're
6:17
Speaker 3: starting to see some pressure coming from there. We're also
6:20
Speaker 3: getting to the point now, Chuck, where.
6:22
Speaker 2: Actually, sorry, I overestimated it's forty thousand flights world it's
6:24
Speaker 2: about forty five thousand worldwide. It's about twenty seven thousand
6:28
Speaker 2: flights domestically, I believe.
6:31
Speaker 3: Okay, So we're starting to get to the points, not
6:35
Speaker 3: only Chuck, where we are missing weekly data points that
6:37
Speaker 3: can't be released. But let's imagine that the government reopened tomorrow,
6:42
Speaker 3: we probably aren't getting it gonna happen because the House
6:44
Speaker 3: is not in session, right, not going to happen in
6:47
Speaker 3: the first place. But even if it did, we probably
6:50
Speaker 3: wouldn't be getting our jobs report for the month of
6:52
Speaker 3: October because the data wasn't collected.
6:54
Speaker 2: We might not get inflation reports.
6:56
Speaker 3: And so if you're wondering, like, how could this government
6:59
Speaker 3: shutdown actually cloud things quite a bit, it would be
7:04
Speaker 3: that the economy could be changing now and we might
7:06
Speaker 3: not find out until December, hypothetically, because the releases that
7:10
Speaker 3: would normally occur even if the government's open. You know,
7:14
Speaker 3: what are you gonna do release the data and say
7:16
Speaker 3: we didn't have anybody working so we couldn't collect the data.
7:20
Speaker 2: Right.
7:21
Speaker 3: It is a two part process. First you collect it
7:23
Speaker 3: and analyze it, and then you release it to the
7:26
Speaker 3: general public. It doesn't matter if the government's open by
7:28
Speaker 3: the time you're supposed to release to the general public
7:30
Speaker 3: if you didn't have time to collect it in the
7:31
Speaker 3: first place.
7:32
Speaker 2: Yeah, and this is where we get into Okay. You know,
7:35
Speaker 2: you start looking at like the Indeed Postings Index, and
7:37
Speaker 2: you start looking at you know, the Paychecks Small business
7:41
Speaker 2: Jobs Index to try to, you know, figure out what's
7:44
Speaker 2: happening here. You start looking at things like, hey, what
7:47
Speaker 2: are we seeing and tax withholding for Social Security and
7:51
Speaker 2: fight attaxes and things like that, and you try to
7:55
Speaker 2: piece together, you know, an idea based on it, but ultimately,
7:58
Speaker 2: if you're not getting the same data point that you're
8:00
Speaker 2: used to, it's just not as easy to tell what's happening.
8:04
Speaker 2: So I think that as we sit here right now,
8:09
Speaker 2: those supplemental data points do continue to point to a
8:11
Speaker 2: weakening in the labor market. And so given the fact
8:15
Speaker 2: that we got CPI data on Friday that was pretty
8:19
Speaker 2: darn good. Not perfect, but like, if you're grading it out,
8:22
Speaker 2: it's a solid B, I'll give it a solid BEE.
8:25
Speaker 2: I hesitate to give it a B plus because anytime
8:28
Speaker 2: you get point three percent in the headline, I don't
8:30
Speaker 2: think you can go B plus on it because that's
8:32
Speaker 2: a three and a half percent annualized inflation rature. But
8:36
Speaker 2: you can give it a solid B and say core
8:38
Speaker 2: CPI came in at point two, median came in at
8:41
Speaker 2: point two, trimmed mean came in at point two. So
8:44
Speaker 2: there's nothing in that Friday report that suggests the FED
8:48
Speaker 2: is going to suddenly pivot and say no, we're now
8:51
Speaker 2: more concerned about inflation, and so given that plus the
8:55
Speaker 2: weakening of you know, some of this supplemental data on
8:57
Speaker 2: the job side, you look at it and say, yeah,
9:00
Speaker 2: I would be pretty shocked if the Fed does not
9:03
Speaker 2: cut another quarter percent on Wednesday, right.
9:06
Speaker 3: But yeah, I mean I think the risk, Chuck, We've
9:10
Speaker 3: got enough inflation data with this most recently released on
9:14
Speaker 3: Friday that I think we can for the time being
9:18
Speaker 3: at least put that to the back seat. And the
9:21
Speaker 3: fact is we've been more concerned about job growth and
9:25
Speaker 3: the labor market of the last few months, and that
9:27
Speaker 3: is going to be the piece that we have very
9:29
Speaker 3: little data on and risk not knowing what's going on
9:33
Speaker 3: under the surface based on the government shutdown. So if
9:35
Speaker 3: there's one piece of this on the government data piece
9:37
Speaker 3: that concerns me, it is the labor market data and
9:40
Speaker 3: the lack thereof.
9:41
Speaker 2: And by the way, currently the shutdown is into its
9:44
Speaker 2: twenty seventh day at the moment. Prediction markets, if you
9:48
Speaker 2: look at CALSHI right now, they've got the shutdown lasting
9:52
Speaker 2: forty five point two days, the longest ever. Oh yeah,
9:56
Speaker 2: the longest ever is thirty four. So if we get
9:58
Speaker 2: to November fifth, with which is next Wednesday, then we're
10:05
Speaker 2: part of history, Michael, record breaking territory. I mean you
10:08
Speaker 2: and me aren't part of it, no, but we're seeing it.
10:11
Speaker 2: Then if we get to Wednesday, which I don't want
10:16
Speaker 2: to say is like a foregone conclusion, but it's it's
10:18
Speaker 2: pretty likely. I mean again, the House is not in
10:20
Speaker 2: session this week at all, and so you know, it's
10:27
Speaker 2: just kind of like, okay, like here we are, so
10:31
Speaker 2: I think there's a decent chance, Like if you don't
10:34
Speaker 2: have something by next week, By like the end of
10:37
Speaker 2: next week, it's tough for me to see this going
10:41
Speaker 2: to Thanksgiving, just because no one wants Thanksgiving travel with
10:46
Speaker 2: low levels of TSA agents and low levels of air
10:51
Speaker 2: traffic controllers, right, So you kind of look at the
10:54
Speaker 2: calendar and you're like, Okay, it's that week of the
10:57
Speaker 2: tenth or the seventeenth that you maybe get this resolution.
11:00
Speaker 2: And that falls right in that forty five day window,
11:02
Speaker 2: which is why I think betting markets are kind of
11:05
Speaker 2: circling that. Now we've kind of been in that range
11:08
Speaker 2: for the last week or so, aside from that brief
11:11
Speaker 2: period last Monday. Remember when I forget who it was
11:13
Speaker 2: said they were hoping to get a vote on the deal.
11:17
Speaker 2: Last week someone said that, and we were like, okay,
11:20
Speaker 2: like betting markets aren't quite buying it, but yeah, they
11:22
Speaker 2: bought it a little. Aside from that little optimism last Monday,
11:25
Speaker 2: we've basically been in this range for the last you know,
11:28
Speaker 2: seven ten days, everyone thinking, okay, it's going to be
11:30
Speaker 2: about a forty five day shutdown. Quick break here. When
11:33
Speaker 2: we return, we're going to talk Argentina next.
11:38
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Speaker 2: All right, let's talk a little bit about Argentina. We're
12:42
Speaker 2: gonna not really put on our Argentina expert hats because
12:45
Speaker 2: we're not. But here is what we do know is
12:49
Speaker 2: over the weekend, Javier Malay's party won almost forty percent
12:54
Speaker 2: of the national vote, which more than doubles its representation
12:58
Speaker 2: in the Argentinian Congress. So what this means. Remember about
13:03
Speaker 2: a month ago, there was a vote, I forget exactly
13:06
Speaker 2: where it was in Argentina, but the candidate aligned with
13:09
Speaker 2: Malay's party came in far weaker than people were expecting.
13:12
Speaker 2: It was in the Buenos and this is what kind
13:14
Speaker 2: of triggered some of the concern about the Argentinian peso
13:18
Speaker 2: and where things would go. So I think what this
13:22
Speaker 2: likely does as it relates to US in the United States,
13:26
Speaker 2: where look, let's be one hundred percent honest, the US
13:29
Speaker 2: does not have like some huge trade relationship with Argentina
13:32
Speaker 2: or anything along those lines. But we did just lend
13:35
Speaker 2: Argentina twenty billion dollars through a currency swap and have
13:39
Speaker 2: promised to raise another twenty billion. It takes some of
13:42
Speaker 2: the short term potential for losses on that off the table,
13:47
Speaker 2: simply because Malay's party is now going to basically be
13:51
Speaker 2: in a position where, yes, they are not in you know,
13:54
Speaker 2: the majority, but it gives them enough power to put
14:00
Speaker 2: potentially veto any of the or reject any potential reforms
14:05
Speaker 2: to the reforms that Malay has put in place to
14:08
Speaker 2: this point, Whether or not any of this ends up
14:11
Speaker 2: actually working out for Argentina, I have no idea, because
14:14
Speaker 2: who knows what happens over the next couple of years.
14:17
Speaker 2: But I think that in terms of the you know
14:21
Speaker 2: why it matters for the US, had this election gone
14:24
Speaker 2: against Malay, you probably would have seen significant additional pressure
14:28
Speaker 2: on the Argentinian peso as early as today, and that
14:33
Speaker 2: would have likely made those that swap line very likely
14:36
Speaker 2: to be defaulted on.
14:38
Speaker 3: And President Trump probably said that if the election went
14:41
Speaker 3: against Malay, then the United States would basically wash our
14:44
Speaker 3: hands of the issue and step away.
14:46
Speaker 2: I don't know.
14:48
Speaker 3: I guess it would have been painted into a corner
14:49
Speaker 3: where that the case, because it would have been a
14:51
Speaker 3: situation where, to your point, that PESO might have sold off,
14:54
Speaker 3: they might have started burning through the US cash and
14:56
Speaker 3: we would have to decide whether we were doubling down
14:58
Speaker 3: on that that pushes off that need. I think there
15:01
Speaker 3: is likely still the strong desire for and need for
15:04
Speaker 3: the additional twenty billion that was discussed with large US banks.
15:08
Speaker 3: Whether or not they will get over the hump to
15:11
Speaker 3: feel comfortable doing that, and have you know, enough of
15:14
Speaker 3: an incentive to do so, is still an open question.
15:17
Speaker 3: And look, the other big open question remains, how does
15:21
Speaker 3: this benefit the United States? And you know there's been
15:25
Speaker 3: discussion of agricultural trade and other pieces here, but does
15:29
Speaker 3: it genuinely change the US influence in the region, Does it,
15:35
Speaker 3: you know, put up some new type of guardrail against
15:40
Speaker 3: Chinese influence. I think those are all open questions that
15:42
Speaker 3: I don't see a ton.
15:43
Speaker 2: Of evidence for.
15:44
Speaker 3: And so I think generally speaking, if you are the
15:47
Speaker 3: US taxpayer, good news over the weekend for this election.
15:52
Speaker 3: But ambiguously yeah, yeah, but you know, very unclear as
15:56
Speaker 3: to what happens next there, and like you said, kind
16:00
Speaker 3: of throws an additional several month lifeline out to Argentina
16:04
Speaker 3: in terms of continuing the policies of Malay, which again
16:07
Speaker 3: are controversial and big changes compared to the last several decades.
16:13
Speaker 2: Yeah, the big thing. Look, next presidential election in Argentina
16:15
Speaker 2: is going to be in two years, at the end
16:17
Speaker 2: of October and twenty seven, and so it gives Malay
16:20
Speaker 2: another two years to be able to try to prove yeah,
16:23
Speaker 2: this is what is going to work for Argentina in
16:27
Speaker 2: the long run. Had this one gone against him, there's
16:30
Speaker 2: a pretty good chance that the Argentinian government would not have,
16:32
Speaker 2: you know, continued to exist in its current form through
16:35
Speaker 2: that time, because Malay would not have been able to
16:39
Speaker 2: do what he wanted to and you know, probably run
16:41
Speaker 2: into some debt problems pretty darn quickly, as you tend
16:45
Speaker 2: to in Argentina. So I think that you've got the
16:48
Speaker 2: next couple of years to see how this plays out
16:50
Speaker 2: for you know, any of you listening wondering how does
16:52
Speaker 2: this affect me? It just means that that twenty billion
16:55
Speaker 2: dollars swap line, that twenty billion dollar loan that the
16:57
Speaker 2: US is making Argentina much less likely to be defaulted
17:01
Speaker 2: on in the short term. But we still don't know
17:03
Speaker 2: the full outcome there. Yeah, I think that's fair to say.
17:06
Speaker 3: I would be fascinated in a comparison piece between the
17:09
Speaker 3: point has been made by Mark Fandetti and others that
17:13
Speaker 3: you know, one hundred years ago, these two countries, the
17:15
Speaker 3: United States and Argentina, from an economics perspective, looked pretty similar. Yeah,
17:23
Speaker 3: wealth per capita, income per capita looked very similar on paper.
17:26
Speaker 3: And then you had the next hundred years that just developed.
17:28
Speaker 2: In a way where.
17:31
Speaker 3: For whatever reason, the US went in one direction and
17:34
Speaker 3: Argentina went in a very different one. And you know,
17:37
Speaker 3: people point to institutions, they point to corruption, they point
17:40
Speaker 3: to all sorts of different things. But that piece is
17:43
Speaker 3: very fascinating to me.
17:44
Speaker 2: I mean, some of it's probably just luck luck, Yeah, right,
17:47
Speaker 2: Like how much how much of it is is luck
17:49
Speaker 2: over the course of the last hundred years.
17:51
Speaker 3: It is a really really interesting case study. And I
17:55
Speaker 3: mean how economies developed.
17:57
Speaker 2: You can I can personally think of at least like
18:00
Speaker 2: three or four different situations where it's like, hey, if
18:03
Speaker 2: this went differently, things would have turned out badly for
18:06
Speaker 2: the US in the twentieth century, or things would have
18:08
Speaker 2: turned out well for Argentina based on like a few
18:12
Speaker 2: key events going just a little bit differently than they had. Right,
18:16
Speaker 2: speaking of events that can go a little differently than
18:19
Speaker 2: they have over the weekend, the US and China have
18:24
Speaker 2: apparently agreed to a framework for a deal for at
18:27
Speaker 2: least the second or third time this year. I go
18:32
Speaker 2: back to I think it was May when we thought
18:33
Speaker 2: we had a framework for a deal, and now we've
18:35
Speaker 2: got a new framework for a deal. The things that
18:38
Speaker 2: are likely to be we don't have specifics on any
18:41
Speaker 2: of this yet, but the things that are likely to
18:44
Speaker 2: be included in this that are being talked about are
18:48
Speaker 2: a China resuming soybean purchases, potentially b China potentially starting
18:55
Speaker 2: to reduce exports of fentanyl and fentanyl precursor to the
18:59
Speaker 2: United States, both countries looking at reforming new port fees
19:05
Speaker 2: for ships, and the Chinese side agreeing to potentially a
19:12
Speaker 2: one year halt in any changes to their rare earth
19:16
Speaker 2: exports before new export controls go into place. The reason
19:19
Speaker 2: that I say potentially on all this is we still
19:22
Speaker 2: don't have any specifics and are still waiting to know them.
19:25
Speaker 2: We might later this week, it might take longer, but
19:28
Speaker 2: these are the things being talked about quick Break. We've
19:31
Speaker 2: got Wall Street Watch, and then we'll dig in a
19:32
Speaker 2: little bit more on this when we return.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch. A complete look at what's moving markets so
19:56
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 4: Markets are beginning a significant week on tap well into
20:04
Speaker 4: positive territory is Wall Street Await. It's a flurry of
20:07
Speaker 4: big tech earnings, a FED meeting, and a pivotal meeting
20:11
Speaker 4: between President Trump and Chinese President g on Thursday. Right now,
20:15
Speaker 4: the DOO is up about a half a percent er
20:18
Speaker 4: two hundred and fifty three points, SMP five hundred is
20:21
Speaker 4: up nine tenths of one percent or sixty one points higher,
20:24
Speaker 4: Nasdaq up one and a half percent now where three
20:27
Speaker 4: hundred and forty seven points higher, Rusted two thousand is
20:29
Speaker 4: up two thirds of one percent, Tenure Treasure reeled up
20:33
Speaker 4: two basis points at four point zero two two percent,
20:37
Speaker 4: and crude oil up about three tenths of one percent,
20:40
Speaker 4: trading at sixty one dollars and sixty seven cents a
20:43
Speaker 4: barrel rare earth stocks including MP Materials, Critical Metals, and
20:47
Speaker 4: USA Rare Earth are seeing losses on the day after
20:51
Speaker 4: US officials said they'd expect China to delay introducing export
20:55
Speaker 4: controls on critical minerals as part of a broader trade deal.
21:00
Speaker 4: Chip stocks, including IN Video, AMD and others are seeing
21:03
Speaker 4: gains on the day following optimistic comments from both the
21:05
Speaker 4: US and China following trade talks over the weekend. And
21:08
Speaker 4: Videos up about two percent, while AMD shares are flat
21:12
Speaker 4: at the moment. Some breaking news in the chip sector
21:15
Speaker 4: after Qualcomm announced that it will release new AI accelerator chips.
21:20
Speaker 4: Qualcomm is surging eighteen percent on that news. Meanwhile, shares
21:26
Speaker 4: in Cured Doctor Pepper climbing six percent after the beverage
21:29
Speaker 4: company beat third quarter revenue forecast and also raised its
21:33
Speaker 4: full year guidance. Lululemon up four percent after the athletic
21:37
Speaker 4: apparel maker said it was partnering with the NFL and
21:39
Speaker 4: Fanatics to launch an apparel collection for all NFL teams.
21:45
Speaker 4: And As for earnings this week, Visa and United Health
21:48
Speaker 4: will report tomorrow. Wednesday, we'll see Microsoft, Alphabet, Meta and
21:52
Speaker 4: Caterpillar report Thursday, Apple, Amazon, and MasterCard will post their
21:57
Speaker 4: results and on Friday we'll see earnings from Exxon Mobile
22:00
Speaker 4: and Chevron. I'm Tucker Silva and that is Wall Street Watch.
22:04
Speaker 2: So last segment towards the end, we noted that the
22:08
Speaker 2: US and China appear to be, you know, inching closer
22:12
Speaker 2: towards a framework of a deal. Actually just had you know,
22:17
Speaker 2: like again you read stuff like on social media it's like, yeah,
22:21
Speaker 2: like this is the fourth time that like we've had
22:23
Speaker 2: one of these this year. So I do think, Look,
22:26
Speaker 2: it's it's positive that at least in the short term,
22:29
Speaker 2: it takes some of those bigger issues off the table potentially,
22:34
Speaker 2: but we've seen these issues return time and time again.
22:37
Speaker 2: Remember it was, you know, late in the first half
22:40
Speaker 2: of the year when we had questions about rare Earth exports,
22:44
Speaker 2: and then that came up again just a month or
22:46
Speaker 2: so ago, and and so I guess the question is
22:49
Speaker 2: on the stuff that really matters Rare Earth's, which is
22:53
Speaker 2: you know one of them, are you going to see
22:56
Speaker 2: actual progress made, not just in terms of, hey, we
22:59
Speaker 2: could potentially sign something that says we're going to do
23:02
Speaker 2: X y Z, but then also what's the follow through
23:05
Speaker 2: from it? Remember, towards the end of President Trump's first term,
23:09
Speaker 2: the Phase one trade deal with China was signed, which
23:12
Speaker 2: by and large was a purchase order from China in
23:15
Speaker 2: order to buy a bunch of American goods over a
23:18
Speaker 2: fixed period of time. Mike, did China end up fulfilling
23:21
Speaker 2: those promises? So it's not just can you get it
23:25
Speaker 2: done in signing, but then can you enforce it? And
23:28
Speaker 2: to this point we still don't have the details on
23:30
Speaker 2: you know, exactly what this means, and you know, we
23:33
Speaker 2: can't get to enforcement beyond there. But obviously, look, one
23:38
Speaker 2: of the threats that was out there was, hey, you
23:39
Speaker 2: could have these new one hundred percent tariffs on China
23:41
Speaker 2: put in place on November first. Clearly, if you're moving
23:45
Speaker 2: towards the framework of a deal or the framework of
23:47
Speaker 2: a framework, then at least to take some of those
23:50
Speaker 2: short term things off the table, which is why you
23:52
Speaker 2: can have markets rally, you know. In response, the other
23:56
Speaker 2: piece that just.
23:58
Speaker 3: Was important to me, so Tucker mentioned USA rare earth
24:02
Speaker 3: off thirteen point seven percent today, MP materials off nearly
24:06
Speaker 3: ten percent today. This is just a stark reminder that
24:10
Speaker 3: whatever happens between the US and China in terms of
24:12
Speaker 3: a trade deal. It would seem to me that a
24:16
Speaker 3: piece of legislation on rare earth sourcing in the United
24:21
Speaker 3: States and a few close allies nations is exceedingly important
24:25
Speaker 3: right now because you have the hypothetical rumor that maybe
24:29
Speaker 3: rare earths aren't going to be as heavily restricted as
24:31
Speaker 3: they previously were, and these companies are volatile and small
24:34
Speaker 3: enough that their stocks are going wild on this new
24:38
Speaker 3: I mean again, I guess wild would be down like
24:41
Speaker 3: fifty percent. You don't have that, But you have these
24:43
Speaker 3: companies depreciating by ten and fourteen percent on the rumor
24:47
Speaker 3: of something that might come in the future. These companies
24:50
Speaker 3: need some very public commitments from Congress saying that, yeah,
24:55
Speaker 3: you have a business model for the next thirty years.
24:59
Speaker 2: Right now they don't, no exactly. So I think ultimately
25:04
Speaker 2: this US China framework, what it develops into, it could
25:11
Speaker 2: be something important, it could be nothing, And I just
25:13
Speaker 2: don't think we know enough right now to be able
25:15
Speaker 2: to tell.
25:16
Speaker 3: Right I think one thing that would be immensely surprising
25:20
Speaker 3: to both of us, Chuck, would be any sort of
25:23
Speaker 3: verifiable long term commitment from either of these two from
25:27
Speaker 3: either US or them, right like, yeah, purchases of agricultural goods.
25:32
Speaker 3: But you know what I'd be surprised to hear is
25:35
Speaker 3: some sort of commitment on something like that with a
25:39
Speaker 3: real framework for what happens if it doesn't get fulfilled. Yeah,
25:42
Speaker 3: because in all likelihood I think we sign something along
25:45
Speaker 3: those lines, neither group really fulfills the promises, and it's
25:50
Speaker 3: just a question of do we punish each other or
25:53
Speaker 3: do we just continue with the status quo of being
25:56
Speaker 3: slightly uncomfortably reliant on each other for different things.
26:00
Speaker 2: Do we want to talk any more about I don't
26:02
Speaker 2: really have any further I don't have anything interesting to
26:06
Speaker 2: say on this. I don't think keep saying conclusion.
26:12
Speaker 3: The main conclusion is that thirty years of history tell
26:14
Speaker 3: you that the Chinese strategy is to wait out the
26:17
Speaker 3: United States for either a change of administration or a
26:20
Speaker 3: you know, focus on something else so that they can
26:23
Speaker 3: get distracted from the issue of challenging China. And I
26:26
Speaker 3: don't see any compelling reason why that wouldn't be the
26:29
Speaker 3: strategy this time.
26:30
Speaker 2: Can we talk about the Federal Reserve then, then? Yeah, okay,
26:33
Speaker 2: because they do have some interesting thoughts on them, or
26:35
Speaker 2: at least I think they are our listeners can ultimately
26:38
Speaker 2: decide yes, is it worth continuing to tune into peace
26:42
Speaker 2: from barons? Sure? Sure piece from barons. The FED may
26:47
Speaker 2: lower rates slower than markets are expecting in twenty twenty six.
26:52
Speaker 2: Quite honestly, I'm not sure that they can lower them
26:54
Speaker 2: that much slower and less inflation picks up. And what
26:57
Speaker 2: I mean by this is, right now, we've got two
27:00
Speaker 2: more FED meetings in twenty twenty five. As of right now,
27:05
Speaker 2: there's a ninety three point nine percent chance that the
27:08
Speaker 2: FED has cut by another half percent by the end
27:12
Speaker 2: of the year, twenty five quarter percent this month and
27:15
Speaker 2: a quarter percent in December. Beyond that, if you look
27:18
Speaker 2: out to twenty twenty six and kind of the you know,
27:21
Speaker 2: the end of twenty six, the last meeting next year
27:24
Speaker 2: is going to be on twelve nine. What's being priced
27:28
Speaker 2: in is basically like a ninety six percent chance of
27:33
Speaker 2: additional cuts, with it being a toss up as to
27:36
Speaker 2: whether it is greater than or fewer than two cuts.
27:41
Speaker 2: So basically it's like, yeah, we're pricing in like two
27:43
Speaker 2: more cuts in markets right now. Yeah.
27:45
Speaker 3: I think if markets were telling you that rates are
27:48
Speaker 3: going to be two percent lower by the end of
27:49
Speaker 3: next year.
27:50
Speaker 2: I would agree with this piece. They're just not right.
27:53
Speaker 3: I think the median case right now, based on betting markets,
27:57
Speaker 3: is that rates are what may be a percentage point
28:00
Speaker 3: lower than where they are, and we are fairly certain
28:02
Speaker 3: that we're going to get two of these things this year.
28:04
Speaker 3: So that doesn't seem like a far cry away from
28:07
Speaker 3: what I would generally expect in this type of economy
28:10
Speaker 3: where inflation is concerning but not alarming, and labor market
28:15
Speaker 3: has showed significant deterioration. Yeah, I mean, we've got what
28:19
Speaker 3: fifteen months before year end of twenty twenty six, it'd
28:24
Speaker 3: be pretty surprising to me if rates weren't a full
28:26
Speaker 3: percentage point lower.
28:27
Speaker 2: So I think ultimately, when looking at this, you think
28:31
Speaker 2: about this in terms of this is kind of the
28:33
Speaker 2: way that we think about things here basically all the time. Okay,
28:39
Speaker 2: what's the situation where you get exactly what the market's
28:41
Speaker 2: pricing in economy doesn't fall off a cliff, Inflation doesn't
28:47
Speaker 2: become a problem, and in fact starts to get better
28:50
Speaker 2: as you head into twenty twenty six, So like last
28:54
Speaker 2: Friday's inflation report becomes more the norm, and you say, yeah,
28:58
Speaker 2: the Fed could probably cut a couple time next year
29:00
Speaker 2: without any major problem. And that's the path to getting
29:04
Speaker 2: exactly what the market predicts. Cool, what's the way that
29:09
Speaker 2: the market gives you that the economy gives you fewer
29:13
Speaker 2: cuts than what's priced in. Hey, inflation doesn't really get
29:18
Speaker 2: much better, maybe even gets a little bit worse, and
29:22
Speaker 2: the economy takes off like a rocket ship because of
29:24
Speaker 2: provisions from the One Big Beautiful Bill Act. And there's
29:28
Speaker 2: no need for the Fed to cut next year. Okay,
29:31
Speaker 2: that's that's possible. I could see that as you know,
29:33
Speaker 2: a path we can take. What's the path to more
29:37
Speaker 2: cuts that are being priced in? Things fall apart in
29:39
Speaker 2: the next few months. Private credit is a big problem.
29:41
Speaker 2: Housing continues to be a problem. Job loss becomes a
29:43
Speaker 2: big problem, and you end up needing to take the
29:46
Speaker 2: Fed funds rate down to two percent instead of you know,
29:50
Speaker 2: four percent where it is today. If you're trying to
29:54
Speaker 2: price out like the probabilities of these guys, we're not
29:57
Speaker 2: getting economic data right now. I have no eye idea.
30:00
Speaker 2: Twenty twenty six is the choose your own adventure economy.
30:05
Speaker 2: It's we have no idea what we are going to
30:08
Speaker 2: be getting there, and I think we have to remain
30:11
Speaker 2: open to a wide, wide range of possibilities. What I
30:15
Speaker 2: can tell you right now, based on the data that
30:18
Speaker 2: we have gotten in the last six weeks or so,
30:21
Speaker 2: it probably skews towards more cuts than are water being
30:25
Speaker 2: priced in right now, because inflation is coming better than
30:28
Speaker 2: we expected, and the jobs data that we do have
30:32
Speaker 2: where we can glean from other sources is continuing to weaken,
30:36
Speaker 2: and that would point towards more help being needed on
30:38
Speaker 2: the rate side. The big question that I do think
30:40
Speaker 2: looms out there is, hey, how effective can interest rates
30:43
Speaker 2: be it managing this problem? Because we're clearly seeing even
30:48
Speaker 2: though interest rates and mortgage rates have now come down
30:51
Speaker 2: over the last six weeks, there's no more upward inflection
30:54
Speaker 2: in mortgage applications. You're not seeing improved housing activity, and
30:59
Speaker 2: so you know, housing is not a great transmission mechanism
31:02
Speaker 2: in this cycle, at least towards more activity. And is
31:10
Speaker 2: is cutting rates another you know, couple percent going to
31:12
Speaker 2: do it if in fact, the economy you know, starts
31:15
Speaker 2: to really struggle. I don't know, it's it's it's a
31:18
Speaker 2: hard maybe in my opinion. So we'll see. But we're
31:22
Speaker 2: also not there right now. You might not need that.
31:24
Speaker 2: You might see the economy start to inflect back up
31:26
Speaker 2: and boom, now you're in great shape and you don't
31:29
Speaker 2: need more cuts. Like that's very possible too. To take
31:32
Speaker 2: a quick break here when we return, anything more on
31:36
Speaker 2: inflation or do we want to talk hiring. Let's go
31:38
Speaker 2: to hiring stalk hiring, and then we'll talk housing in Austin,
31:42
Speaker 2: Texas after this.
31:44
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32:03
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32:06
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32:17
Speaker 2: Piece from the Wall Street Journal that really captures the
32:20
Speaker 2: zeitgeist of the current business cycle. More big companies bet
32:25
Speaker 2: they can still grow without hiring. And this is like
32:30
Speaker 2: you see all these announcements, you know, whether it's Walmart,
32:33
Speaker 2: whether it's JP Morgan, whether it's Amazon saying yeah, we
32:38
Speaker 2: want to grow, but we're gonna do it without growing headcount,
32:41
Speaker 2: which is something that we have not seen before in
32:47
Speaker 2: the American economy and I would argue we're not seeing
32:50
Speaker 2: it right now either. What's the what's the work schedule
32:54
Speaker 2: that's making straight through AI right now? I don't even
32:59
Speaker 2: know what that is.
33:00
Speaker 3: The nine nine refers to the nine am to nine pm,
33:04
Speaker 3: six days a week schedule. Yeah, that's a crappy schedule, yes,
33:08
Speaker 3: and it originated in China's tech industry.
33:10
Speaker 2: And my point is just.
33:13
Speaker 3: I'm unconvinced that we are seeing any massive productivity growth
33:17
Speaker 3: right now. I think we are seeing this pressure on
33:19
Speaker 3: don't hire, we want to grow without hiring new people.
33:23
Speaker 3: But I'm also seeing immense new pressure put on employees
33:26
Speaker 3: to be more productive and to work longer hours. And
33:30
Speaker 3: so I have a tough time figuring out, Hey, are
33:32
Speaker 3: we actually seeing a big productivity boom right now? Is
33:35
Speaker 3: it because of artificial intelligence and CANNA continue or did
33:40
Speaker 3: things get so loose in terms of employment back in
33:43
Speaker 3: twenty twenty twenty one that employers are feeling like they
33:46
Speaker 3: have the leverage and are really pressing them to work
33:50
Speaker 3: longer hours.
33:50
Speaker 2: Be more productive.
33:52
Speaker 3: And I you know, I'm using that word productivity here
33:56
Speaker 3: when I'm describing all of this, but so much of
33:59
Speaker 3: this is being point to that is AI is going
34:01
Speaker 3: to revolutionize things, and I'm just not willing to say
34:04
Speaker 3: it until I see it.
34:05
Speaker 2: No, but I do think, like, if you look at
34:07
Speaker 2: what we're going through right now in the US economy,
34:10
Speaker 2: companies are growing without raising headcount. I mean, yeah again
34:14
Speaker 2: the last three months that we have for jobs data,
34:17
Speaker 2: twenty nine thousand jobs a month added according to the
34:20
Speaker 2: BLS data. And they're growing their profits and profits are
34:23
Speaker 2: moving up. Yeah. Now again because this is more big
34:26
Speaker 2: companies as the headline. If you are a small firm,
34:30
Speaker 2: I don't know that you're necessarily seeing that you maybe
34:34
Speaker 2: you may not be, but like in the aggregate, it's
34:35
Speaker 2: not like we look at the Russell two thousand and
34:37
Speaker 2: we're like, wow, look at the productivity and they're cutting
34:39
Speaker 2: head count. Like no, that's it's not what we're seeing.
34:42
Speaker 3: So such is unique and weird during a market cycle
34:46
Speaker 3: like this because generally speaking, when when companies talk about
34:51
Speaker 3: bringing on some new, big innovative thing, they're talking about
34:54
Speaker 3: raising headcount along with those announcements, yes, and when their
34:58
Speaker 3: stock price is getting killed and they're talking about cutting
35:01
Speaker 3: head counts, And we have kind of the opposite thing
35:03
Speaker 3: going on here right We're reaching all to all new
35:05
Speaker 3: highs in the stock market. Companies are beating earnings and
35:08
Speaker 3: then also saying and here's how we intend to do
35:11
Speaker 3: this with fewer people in the future.
35:13
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36:16
Speaker 2: File this one under legislation that I don't think is
36:20
Speaker 2: going to have the effect that you intend it to. Uh.
36:23
Speaker 2: There is a bill that is penning in the Massachusetts
36:26
Speaker 2: state legislature that would limit the number of self check
36:29
Speaker 2: self checkout kiosks at grocery stores in Massachusetts. So it
36:35
Speaker 2: looks like really nothing better for you to do. It
36:37
Speaker 2: looks like the framework on this is that it would
36:40
Speaker 2: limit grocers to eight self service checkout stations operating at
36:44
Speaker 2: any one time per location, and grocers with self checkout
36:47
Speaker 2: stations will have a minimum of one manual checkout station
36:50
Speaker 2: operating for every two self checkout stations operating.
36:54
Speaker 3: So a few thanks on this. Hold on you have
36:56
Speaker 3: to have one manual one per for every two. Oh man,
37:01
Speaker 3: that like Costco and BJS are screwed, Yes, like literally screw.
37:05
Speaker 2: But when I go to BJ's to buy groceries, there
37:06
Speaker 2: are eight self checkout lines and one person one. So
37:10
Speaker 2: a couple things on this. The first is this directly
37:13
Speaker 2: goes against like improve productivity, because if you can do
37:16
Speaker 2: more with less, that's what productivity is. Now, my first
37:19
Speaker 2: job ever was at a grocery store as a cashier,
37:23
Speaker 2: so I know what the job entails. I worked there
37:25
Speaker 2: for I don't know, it was a couple of years,
37:26
Speaker 2: I think, so, Like it wasn't just you know, one
37:28
Speaker 2: weekend and I called it quits. Like I know what
37:31
Speaker 2: the job is and what it isn't. And here's the thing.
37:35
Speaker 2: There are times when I want to have someone help
37:39
Speaker 2: me bagging stuff because I got a big load of
37:42
Speaker 2: whatever and it's a huge pain in yaudia? Are there
37:44
Speaker 2: other times I'm like, no, Like I don't want that.
37:46
Speaker 2: But ultimately, why does this state think it has the
37:50
Speaker 2: right number of self checkout lines that should operate? And
37:54
Speaker 2: b is this trying to predict protect like check out uh,
37:58
Speaker 2: you know, cashier jobs? Is that what we're trying to
38:00
Speaker 2: do here? Because if that's the case, Okay, did in
38:03
Speaker 2: the state of Massachusetts get rid of all toll boots
38:06
Speaker 2: in order to move to the automated tolls? And gee,
38:09
Speaker 2: isn't it a lot better not having to sit in
38:10
Speaker 2: toll traffic protecting obsolete jobs?
38:14
Speaker 3: Which check out person is not yet but just foolhardy
38:18
Speaker 3: quick break here.
38:18
Speaker 2: Hour two coming up in a bit